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These startups are banking on bitcoins

These startups are banking on bitcoins

Ranjani Ayyar

Ever since its creation in 2009, Bitcoin, the world’s first and most popular cryptocurrency, has been in the limelight for multiple reasons. While some countries like Bolivia, Ecuador and Bangladesh have banned bitcoins, Australia and Japan are regulating it.

| TNN | Updated: Jun 11, 2017, 02:55PM IST

What could have led to the increasing acceptance of bitcoins is the surge in its value.

CHENNAI: Ever since its creation in 2009, Bitcoin, the world’s first and most popular cryptocurrency, has been in the limelight for multiple reasons. While some countries like Bolivia, Ecuador and Bangladesh have banned bitcoins, Australia and Japan are regulating it.

Today, there are almost 750 cryptocurrencies with a capitalisation of more than $104 billion. And a small but determined number of startups in India are making early moves in a market that is yet to be recognised by the government.

Sandeep Goenka had started two companies before he decided to set up Zebpay along with Saurabh Agrawal and Mahin Gupta. Drawn to bitcoins, they immersed themselves in research. In 2014, they attended a conference in the US which gave them insights into the future of bitcoins. “We started as a Bitcoin wallet and expected people’s interest to be low, but every time we set targets, we surpassed them,” said Goenka.

When they met investors in 2015, there was apprehension but a year later, the founders raised close to $1 million in a Series A round led by equity investor Arjun Handa, CMD and VP of Claris Life Sciences and Amit Jindal, MD of Jindal Worldwide. Zebpay has 7 lakh users and is adding a lakh every month. The startup is now looking to expand to Southeast Asia.

When Sathvik Vishwanath set up Unocoin along with Sunny Ray, Harish B V and Abhinand Kaseti, they believed in Bitcoin as the future of money despite the apprehensions surrounding cryptocurrencies in India. “Technology always precedes regulation. There were no cab-sharing guidelines before Uber. It is after the disruption and its impact on lives that the government has to look into the issues and decide if it needs regulation,” said Vishwanath.

The Unocoin founding team

What could have led to the increasing acceptance of bitcoins is the surge in its value. From the beginning of 2017, bitcoins have touched an all-time high. In January, the currency crossed $1,000 for the first time in three years. Last month, it crossed $1500, becoming more valuable than gold, which has not touched $1500 in the last four years. Earlier this week, the combined market capitalization of cryptocurrencies crossed $100 billion.

Vishwanath says the surge in prices has helped garner users, adding that Unocoin has 2.7 lakh users. In August 2016, the startup raised funding of $1.5 million in a Pre Series-A round from multiple investors including Blume Ventures, Mumbai Angels and Ah! Ventures along with Digital Currency Group, Boost VC, Bank to the Future, Bitcoin Capital and FundersClub.

For Blume Ventures, bitcoins presented a rare opportunity. “Bitcoin has the ability to transform the way we look at money. When we made the investment, we didn’t know that this sector would become so hot. India has a large unbanked population, and is on its way to becoming digitised. With the possibilities this technology brings in cross-border remittances, it seemed like a natural reason for us to invest in a company dealing with bitcoins,” said Arpit Agarwal, Blume Ventures.

Hesham Rehman was a bitcoin trader for four years before he set up Bitxoxo with Mohammed Rizwan. It now has almost 10,000 users, and the founders are in talks with investors to expand their presence.

The Zebpay founding team

An equity and commodities trader himself, Siva Kameshwara Rao was exposed to bitcoins when he was trading in forex markets. Rao set up BTCX in 2014 but has not limited himself to bitcoins. With ethexindia, Rao has introduced the next digital currency, Ether or Ethereum, to the Indian market. “We have niche users. While bitcoins account for over 40% of the cryptocurrency market, if the current trend continues, it will be Ethereum that will take the number 1 spot,” said Rao, who has seed investment from a Europe based investor.

Rao’s focus on Ethereum is in line with the global backing that the currency is receiving. In February, global behemoths Microsoft, Accenture, Intel, JPMorgan and a dozen other banks and companies formed an alliance around the cryptocurrency. Just last month, Indian IT major Wipro joined the alliance.

While cryptocurrencies have caught the attention of many in India, the lack of clarity in regulations has raised concerns. RBI has issued warnings on usage of bitcoins. In a bid to create a self-regulatory mechanism, Zebpay, Unocoin, Coinsecure and Searchtrade launched Digital Asset and Blockchain Foundation of India (DABFI) in February. “We are working on a draft set of regulations and it should be ready in a few months,” said Vishwanath of Unocoin.

Experts in blockchain, the technology behind Bitcoin, have their own reservations given the hacks it has been subjected to. In August 2010 hackers exploited a vulnerability and generated billions of bitcoins. Mt Gox and Bitomat, two of the largest bitcoin exchanges at the time, suffered massive security breaches in 2011. A couple of years later, Instawallet, a web-based wallet provider, shut down after it lost 35,000 bitcoins.

“Many people believe that bitcoins are un-hackable. But that’s not true. Multi-million dollar hacks have targeted an Australian Bitcoin wallet provider (Inputs.io), a Chinese cryptocurrency exchange (Bter), a Slovenian exchange (Bitstamp), a Hong-Kong-based exchange (Bitfinex). Bitcoin has also seen its fair share of multi-million dollar frauds such as Global Bond Limited and Cryptsy,” said Rohas Nagpal, cofounder, Primechain Technologies.

Nagpal believes bitcoins are just another way to gamble in the hope of making a lot of money in a short time with minimal effort. “The current bitcoin price rise is a massive pump-and-dump scheme which will see millions of people lose a lot of money while a few will rake in billions of dollars in profits,” he said.

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